Texas is the only state in the US with a voluntary workers’ compensation system. While most (81%) employers subscribe to the state run insurance system, 6 percent of employers in Texas have opted for “non-subscription” status.

The Texas House of Representatives’ Business and Industry Committee recently held hearings to examine the “voluntary nature of workers’ compensation in Texas and how it meets the needs of employers and employees.”

A look at the development of the system shows that preserving non-subscription is important for sustaining economic growth in Texas.

A 1917 U.S. Supreme Court ruling set the precedent that mandatory workers’ compensation does not violate an employer’s constitutional due process rights.  As the 49 other US states began adopting legislation mandating employer subscription, Texas refrained.

After this, the system remained largely unchanged until the 1980s when workers’ compensation premium increases of upwards of 150 percent drove a round of reform. Unsurprisingly, non-subscription was at an all-time high. The increasing number of non-subscribing employers sent the government a clear signal that the system was broken. Non-subscription provided a safety valve for employers that otherwise would likely have gone out of business.

Workers’ compensation again adopted major reforms in 2007 to address problems with treatment protocols and quality of care. According to agency officials, since the adoption of HB 7, the state system is doing better than ever, citing lower claims, fewer disputes, and higher satisfaction.

Yet as non-subscription represents 500,000 uninsured Texas workers, the voluntary nature of the workers’ compensation system may be a point of contention in the 84th Texas Legislature.

Beyond the fact that the voluntary system shows Texas’ stand-alone deference to due process rights, non-subscription also means employers have the option to use the market to avoid high premiums within the system. This fact may attract out of state employers who currently have a state system imposed on them in their home states.

Finally, former workers’ compensation commissioner Rob Bordelon credits the voluntary nature of the state system for much of the state system’s efficiency saying, “Because the Texas workers’ compensation system is voluntary, I think that it is incumbent on me as Commissioner to make sure that it operates as efficiently as possible.”